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Trading  | December 25, 2017

Authored by Tom Luongo,

There’s an excellent article over on Breitbart that looks at the details of Coinbase’s surprise roll-out of Bitcoin Cash (BCH) as a trading vehicle on their in-house exchange GDAX. It details the whole sordid mess and I would recommend anyone interested in the topic to read it for what it implies.

To me, however, being the cynic that I am if there is a path to harming Bitcoin and the cryptocurrency market available to the money center banks, then they will always opt for it.

I’ve been pretty vocal about the need for having a slow, annoying reserve asset in the cryptocurrency space.  I’ve talked about it multiple times (here and here).  This doesn’t jibe with Bitcoin Cash proponent and CEO Roger Ver’s image of Bitcoin.

And that is to Roger’s credit, actually.  It’s pretty obvious from a cursory glance at Roger’s Twitter feed that he approaches Bitcoin as a radical libertarian/Austrian Economist would — a purely decentralized, trustless money that can wrest control of the world’s monetary system from rentiers in Government and Banking.

Music to my ears.

Solution in Search of a Problem

On the other hand is the very shady attitude of Blockstream and the Bitcoin Core group who prevailed in the Segwit 2x fight, which, from Roger Ver’s perspective is actually a mop-up operation, not the decisive battle in the war.

bitcoin forks

The real battle for the soul of Bitcoin happened back in August with the fork that created Bitcoin Cash.  Complaining about all of these other forks are, to Roger, is like closing the barn door after the horses are gone.

By keeping Bitcoin slow and expensive they create the need for new solutions to improve it.  Why solve a problem when you can artificially create one and then sell everyone the solution?

So, I’m ambivalent about this fight for the soul of Bitcoin, because I want a real digital analogue to Gold which only moves the most important transactions. I don’t want all coins to be all things to all people.

But, I also know that with this much money at stake there will be pushback from the ‘powers-that-be.’  The Banks and central banks are staring at an existential threat to their future and are doing what they can to stop it from happening.

And that, to them, means gaining control over the Bitcoin blockchain.  It also means cutting off the means of entry and exit from the cryptocurrency market for average people.

And that brings me back to Coinbase.

Coin Wars

I have an article up on this morning that makes the point that Coinbase is, in my opinion, becoming the biggest problem in the crypto-space.

 Coinbase’s liquidity and technical infrastructure is now far too small a pipe through which to push through all of trading activity in the crypto-markets. And with it only trading four coins, that artificially concentrates capital into those assets as the expense of others, destabilizing the entire cryptocurrency space.


And that’s exactly how Coinbase can be used to exert external control over the entire industry by Wall St. and the central banks. By constantly breaking and providing poor to no customer service Coinbase is now the barrier to more money entering the cryptocurrency space. The allure of easy profits will be matched by the headache of someone actually taking your money to buy some Bitcoin or Ethereum without a major hassle. And then, if the market freezes up every 20 minutes and the price always seems to move against you, you’re going to walk away angry.


Again, most of the other exchanges don’t want Americans as customers, we’re too expensive thanks to the regulatory requirements for handling our money, thanks to laws like FATCA.

The idea here is simply to make Bitcoin unusable and remote from the average person.  And then once achieved, promote off-chain and side-chain payment processing that allows for the centralization of transactions as hubs, via the Lightning Network, and replicate the same broken, rent-seeking system in place today.

The only difference is that the Bitcoin mempool backs it all up with some amount of trust.  They know they can’t destroy Bitcoin, but they can seek to take control of it via backdoor means without any of the ‘normies’ being the wiser.

Think about this. I’m plugged into this space and it’s still difficult for me to explain it all, no less see the ramifications of everything.  How in the hell can this be explained to the average person who just bought $250 worth of Bitcoin with their credit card on Coinbase?

Now add cash-settled futures markets having the ability to ‘wag the dog‘ on price; volatility can be pushed and pulled to strip-mine the coins away from hodlers the same way they’ve concentrated capital in the equity and bond markets and the takeover is complete.

Paging Emperor Palpatine

So, thinking this through and going back to my title, was the strange roll out of Bitcoin Cash by Coinbase, a company that took months to support a fork that should have been child’s play to implement, coordinated with the advent of CME Group futures trading to inflict maximal damage on cryptocurrencies in general and Bitcoin Cash in specific?

Since Bitcoin Cash and its leadership are vocal opposition to this perceived takeover of the Bitcoin network, they have motive and reason to implement this scheme.  At the same time Roger Ver can be scapegoated for ‘insider trading’ by implication (regardless of what the blockchain could reveal through analysis).

Coinbase is the artificial funnel for all U.S.-based crypto-investments erected by bad legislation, tax laws and uncertain regulatory guidance.  Using it as the fulcrum on which to move the Bitcoin market in the direction desired by the money center banks only makes sense.

Most of the chaos we are seeing in the crypto-markets stem from this.  It reminds me of the best line of dialogue in The Phantom Menace uttered by then-Senator Palpatine, “I will make it legal.”

You have to be aware that direct assault on the cryptocurrency space will not kill it.  Better to allow it to thrive and subvert it to your gain than simply smack it down.  The latter behavior tips your hand and hardens the opposition ideologically.

Violence only begets greater pushback.  Just look at what happened in Spain this week as Catalan secessionists won a majority in the local elections in response to the crackdown by Madrid in October.

Subversion of both the opposition coins and their proponents is the right strategy to winning people to your side, which reminds me of the only good piece of dialogue in Attack of the Clones, “This is how liberty dies…. to thunderous applause.”

A New Hope

But the thing is that none of this will work.  There are too many projects out there that can and will function better than either Bitcoin or Bitcoin Cash as mediums of exchange and stores of wealth.

And that competition within the cryptocurrency market will, in fact, neuter all attempts at control over it.  People are funny when it comes to money.  They take it far more seriously than they do the things they buy with it.

The rentiers of the banking world think that erecting new barriers will create a crypto-version of the monetary system that will win out over its competition.  And it all comes down to the hashing power undergirding both networks.

If Bitcoin Cash can shrug off this attack on its credibility then it’s superior performance for end-users will see some of the traffic reserved for Bitcoin go to it instead.  And that will shift the hashing power away from one and towards the other.

A natural balance will eventually be established between the two while other coins, like DASH in particular, attract a larger percentage of the mining community.

Looking at the situation currently, Bitcoin Cash is the only real competition for Bitcoin in this respect. But, DASH is coming up quickly.  It how commands more hashing power then Ethereum and Litecoin, but is still less than one percent of Bitcoin Cash’s hashing power.

This is where we’ll see the real fight for the cryptocurrency market play out.  The rentiers are trying to lock down public perception of Bitcoin as the only coin worth owning, while the market is shifting resources towards other networks to combat this from happening.

All of which will, in my mind, marginalize Bitcoin itself.  And it will become relegated, like all industries locked down by regulations and barriers-to-entry, to the sidelines as capital flows to where it is treated best and most needed.

By making Bitcoin slow and unusable, the bad guys are fueling the development of superior coins and hashing networks which will obviate their means of control.

We’ll go through an ugly period of time where as the market adjusts but I’m confident that we’ll see both my vision of Bitcoin as reserve asset which the banks can control if they want, but the rest of the market will be free to to business without such annoyances.

Which brings me to the last line of dialogue that comes to mind when looking at this situation, “The more you tighten your grip, Tarkin. The more star systems will slip through your fingers.”

A revolutionary initiative is helping average Americans find quick and lasting stock market success.

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